Dan Evans

On Thu, 26 Jun 2003 10:24:17 -0500, "Pro Citizen" <procitizen@aol.com>
wrote:

>"The wise man is not he who appears to have all the answers; he is one who
>asks the right questions."
>
>"Should I use Section 861 and following and the regulations thereunder to
>determine my taxable income?"

Well, that's the wrong question.

The right question is whether you need to determine your taxable
income from sources within the United States separately from your
taxable income from sources outside the United States.

For most citizens and residents of the United States, the answer is
"no." Why? Because the general rule is that citizens and residents
of the United States are subject to tax on ALL income, regardless of
source:

"In general, all citizens of the United States, wherever resident, and
all resident alien individuals are liable to the income taxes imposed
by the Code whether the income is received from sources within or
without the United States." Treas. Reg. § 1.1-1(b).

So, is there a section of the Internal Revenue Code that requires you
to determine your taxable income from sources within the United States
separately from your taxable income from sources outside the United
States?

>"Part I (section 861 and following), subchapter N, chapter 1 of the Code,
>and the regulations thereunder determine the sources of income for purposes
>of the income tax" (26 CFR § 1.861-1).

And the following sentence says, "These sections explicitly allocate
certain important sources of income to the United States or to areas
outside the United States, as the case may be...."

>"Determination of taxable income.
>
>The taxpayer's taxable income from sources within or without the United
>States will be determined under the rules of Secs. 1.861-8 through
>1.861-14T, for determining taxable income from sources within the United
>States." (26 CFR § 1.863-1(c))
>
>None of those sections even hint that those sections should be used only by
>those who need to allocate something, or who need to determine the
>geographical original of some item of income.

Only because you insist on ignoring all of the "hints."


**Dan Evans
**I post information, not advice.

XCobraJock

----- Original Message -----
From: "Dan Evans" <dan@evans-legal.com>
Newsgroups: us.taxes,misc.taxes
Sent: Monday, June 30, 2003 10:27 AM
Subject: Re: Simkanin Says

> On Thu, 26 Jun 2003 10:24:17 -0500, "Pro Citizen" <procitizen@aol.com>
> wrote:
> >"Should I use Section 861 and following and the regulations thereunder to
> >determine my taxable income?"
>
> Well, that's the wrong question.
>
> The right question is whether you need to determine your taxable
> income from sources within the United States separately from your
> taxable income from sources outside the United States.
>
> For most citizens and residents of the United States, the answer is
> "no."

"Determination of taxable income. The taxpayer's taxable income from sources
within

OR

without the United States will be determined under the rules of Secs.
1.861-8
through 1.861-14T for determining taxable income from sources within the
United States."
[26 CFR § 1.863-1(c)]

Or? Uh . . .doesn't that RULE OUT any requirement that one have
income from BOTH within and without the United States if one is to
determine "taxable income from sources WITHIN the United States?"

And if section 861 ONLY applies to those taxpayers with income
from BOTH within AND without the United States, how did this get
in there:

"(ii) Relationship of sections 861, 862, 863(a), and 863(b)... Each of
these four provisions applies independently... [T]wo or more of these
provisions may have to be applied at the same time to determine the
proper allocation and apportionment of a deduction."
[26 CFR § 1.861-8(f)(3)(ii)]

The term "may" in that passage means that sometimes the taxpayer
is required to determine taxable income from more than one geographic
area, but not necessarily. The rules under Section 861 apply
INDEPENDENTLY of whether the taxpayer has income from
sources without the United States.

> Why? Because the general rule is that citizens and residents
> of the United States are subject to tax on ALL income, regardless of
> source:
>
> "In general, all citizens of the United States, wherever resident, and
> all resident alien individuals are liable to the income taxes imposed
> by the Code whether the income is received from sources within or
> without the United States." Treas. Reg. § 1.1-1(b).

Yeah, the tax is imposed on all people liable to the taxes "imposed by
the code." And the code determines "taxable income from sources within
the United States" under the provisions of Section 861.

> So, is there a section of the Internal Revenue Code that requires you
> to determine your taxable income from sources within the United States
> separately from your taxable income from sources outside the United
> States?

If you have no income from sources without the United States, Section
861 applies "independently." [26 CFR § 1.861-8(f)(3)(ii)]

> >"Part I (section 861 and following), subchapter N, chapter 1 of the Code,
> >and the regulations thereunder determine the sources of income for
purposes
> >of the income tax" (26 CFR § 1.861-1).
>
> And the following sentence says, "These sections explicitly allocate
> certain important sources of income to the United States or to areas
> outside the United States, as the case may be...."

And that is not all they do. They also determine taxable income
from sources within OR without the United States:

"Determination of taxable income. The taxpayer's taxable income from
sources within OR without the United States will be determined under the
rules of Secs. 1.861-8 through 1.861-14T for determining taxable income
from sources within the United States."
[26 CFR § 1.863-1(c)]

"Sections 861(b) and 863(a) state in general terms how to determine
taxable income of a taxpayer from sources within the United States after
gross income from sources within the United States has been determined."
[26 CFR § 1.861-8]

"Sec. 1.861-8 [is the section] for determining the taxable income
from sources within the United States." [26 CFR § 1.862-1]

"(ii) Relationship of sections 861, 862, 863(a), and 863(b) . . . Each of
these four provisions applies independently . . ."
[26 CFR § 1.861-8(f)(3)(ii)]

> >"Determination of taxable income.
> >
> >The taxpayer's taxable income from sources within or without the United
> >States will be determined under the rules of Secs. 1.861-8 through
> >1.861-14T, for determining taxable income from sources within the United
> >States." (26 CFR § 1.863-1(c))
> >
> >None of those sections even hint that those sections should be used only
by
> >those who need to allocate something, or who need to determine the
> >geographical original of some item of income.
>
> Only because you insist on ignoring all of the "hints."

"Pay no attention to what the code says. Who are you going to believe,
me or your own lying eyes?" --A. Legalman

--XCobraJock

Dan Evans

On Mon, 30 Jun 2003 19:03:26 GMT, "XCobraJock" <X-Cobra@pacbell.net>
wrote:

>----- Original Message -----
>From: "Dan Evans" <dan@evans-legal.com>
>Newsgroups: us.taxes,misc.taxes
>Sent: Monday, June 30, 2003 10:27 AM
>Subject: Re: Simkanin Says
>
>> On Thu, 26 Jun 2003 10:24:17 -0500, "Pro Citizen" <procitizen@aol.com>
>> wrote:
>> >"Should I use Section 861 and following and the regulations thereunder to
>> >determine my taxable income?"
>>
>> Well, that's the wrong question.
>>
>> The right question is whether you need to determine your taxable
>> income from sources within the United States separately from your
>> taxable income from sources outside the United States.
>>
>> For most citizens and residents of the United States, the answer is
>> "no."
>
>"Determination of taxable income. The taxpayer's taxable income from sources
>within
>
> OR
>
>without the United States will be determined under the rules of Secs.
>1.861-8
>through 1.861-14T for determining taxable income from sources within the
>United States."
>[26 CFR § 1.863-1(c)]
>
>Or? Uh . . .doesn't that RULE OUT any requirement that one have
>income from BOTH within and without the United States if one is to
>determine "taxable income from sources WITHIN the United States?"

I have made it a rule not to answer questions that are phrased in the
negative. In my experience, anyone stupid enough to ask such a
question is usually too stupid to understand the answer.

>And if section 861 ONLY applies to those taxpayers with income
>from BOTH within AND without the United States, how did this get
>in there:
>
>"(ii) Relationship of sections 861, 862, 863(a), and 863(b)... Each of
>these four provisions applies independently... [T]wo or more of these
>provisions may have to be applied at the same time to determine the
>proper allocation and apportionment of a deduction."
>[26 CFR § 1.861-8(f)(3)(ii)]
>
>The term "may" in that passage means that sometimes the taxpayer
>is required to determine taxable income from more than one geographic
>area, but not necessarily. The rules under Section 861 apply
>INDEPENDENTLY of whether the taxpayer has income from
>sources without the United States.

Cute, but you forgot about deductions.

>> Why? Because the general rule is that citizens and residents
>> of the United States are subject to tax on ALL income, regardless of
>> source:
>>
>> "In general, all citizens of the United States, wherever resident, and
>> all resident alien individuals are liable to the income taxes imposed
>> by the Code whether the income is received from sources within or
>> without the United States." Treas. Reg. § 1.1-1(b).
>
>Yeah, the tax is imposed on all people liable to the taxes "imposed by
>the code." And the code determines "taxable income from sources within
>the United States" under the provisions of Section 861.

No. The tax in section 1 is imposed on "taxable income," and taxable
income is defined by section 63 as gross income less deductions.
Gross income is defined by section 61 as ALL INCOME, from WHATEVER
source derived.

So why are you calculating taxable income from sources within the
United States separately from taxable from sources outside the United
States?

More importantly, where in section 861 or any of its regulations can
you find ANYTHING that says that your income is not included in your
gross income?

>> So, is there a section of the Internal Revenue Code that requires you
>> to determine your taxable income from sources within the United States
>> separately from your taxable income from sources outside the United
>> States?
>
>If you have no income from sources without the United States, Section
>861 applies "independently." [26 CFR § 1.861-8(f)(3)(ii)]

Then your taxable income is your gross income less your deductions.
See section 63.

Unless you can point to something in section 861 or any of its
regulations that reduces your gross income or increases your
deductions, you're still back to gross income less deductions, which
means you're back to where you started.

>> >"Part I (section 861 and following), subchapter N, chapter 1 of the Code,
>> >and the regulations thereunder determine the sources of income for
>purposes
>> >of the income tax" (26 CFR § 1.861-1).
>>
>> And the following sentence says, "These sections explicitly allocate
>> certain important sources of income to the United States or to areas
>> outside the United States, as the case may be...."
>
>And that is not all they do. They also determine taxable income
>from sources within OR without the United States:

If you have a reason to calculation your taxable income from sources
within the United States separately from your taxable income from
sources outside the United States.

But you still haven't been able to find anything in the Internal
Revenue Code that requires that, or that taxes your income from inside
the US differently from your income outside the US.


>> >"Determination of taxable income.
>> >
>> >The taxpayer's taxable income from sources within or without the United
>> >States will be determined under the rules of Secs. 1.861-8 through
>> >1.861-14T, for determining taxable income from sources within the United
>> >States." (26 CFR § 1.863-1(c))
>> >
>> >None of those sections even hint that those sections should be used only
>by
>> >those who need to allocate something, or who need to determine the
>> >geographical original of some item of income.
>>
>> Only because you insist on ignoring all of the "hints."
>
>"Pay no attention to what the code says.

On the contrary, please read it.

Tell me where it says that you must calculate your taxable income from
sources inside the United States separately from your taxable income
from sources outside the United States.

More importantly, tell me where it says that taxable income is NOT
gross income less deductions.


**Dan Evans
**I post information, not advice.